Lessee and lessor; calculate interest; Type A lease
Response to the following problem:
A Type A lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the fair value and the cost of the asset to the lessor are $150,000.
What would be the amount of interest expense the lessee would record in conjunction with the second quarterly payment on October 1?
What would be the amount of interest revenue the lessor would record in conjunction with the second quarterly payment on October 1?